AUTHOR: GRAEME PALMER
PUBLICATION DATE: MARCH 31, 2025
Gold Kid Trading (Pty) Ltd (“Gold Kid”) refine precious metals including gold. They purchase unwrought gold bars and jewelry containing gold from suppliers who are registered VAT vendors and would have paid VAT on the purchase price. The gold is refined and sold to South African clients who pay the purchase price plus VAT. It also sells refined gold to foreign clients, in which case the transactions are zero-rated for VAT.
After auditing Gold Kid, the South African Revenue Service (“SARS”) claimed that there was fraud as Gold Kid did not receive gold from vendors. Instead, they obtained gold Kruger Rands, on which VAT is not levied, which it smelted and sold as highly refined unwrought gold. SARS alleged that they then claimed VAT refunds for which it had not paid.
SARS sought to hold Andreis Greyvensteyn (“Greyvensteyn”), who was in control of the overall financial affairs of Gold Kid, personally liable for its R3 billion tax debt. Greyvensteyn in turn challenged the constitutionality of the personal liability provisions in sections 180, and 184(2) of the Tax Administration Act, 2011 in the matter Greyvensteyn and Other v CSARS and Others (B2495/2023) [2025] ZAGPPHC 128 (12 February 2025). These provisions provide:
- Section 180: a person is personally liable for any tax debt of the taxpayer to the extent that the person’s negligence or fraud results in the failure to pay the tax debt if that person controls or is regularly involved in the management of the overall financial affairs of the taxpayer and a senior SARS official is satisfied that the person was negligent or fraudulent in respect of the payment of the tax debt of the taxpayer.
- Section 184(2): allows a person to make representations before being held personally liable provided it does not place the collection of the tax in jeopardy.
Greyvensteyn argued that sections 180 and 184(2) violated his constitutional right to access to courts. He contended that a SARS official could find a person acted negligently or fraudulently in steering the taxpayer to act negligently or fraudulently. Such an investigation requires SARS to prove the elements of fraud. For this to occur, SARS performs a judicial function and not an administrative function. This, he argued, ousted the jurisdiction of the court and allowed SARS to resort to self-help. Personal liability, he submitted, should be adjudicated by a court of law and not by SARS.
Greyvensteyn further pointed out that there is no assessment issued for personal liability. This means that should SARS find a third party personally liable for a tax debt of a taxpayer, there is no possibility of appealing the decision to the Tax Court, the only option available to a person being the review process in the High Court. This, Greyvensteyn said, infringed his right to access to courts. He contended that because SARS is investigating the claim and also ascertaining his liability, they are simultaneously litigator and judge in its own cause.
SARS on the other hand argued that section 180 involves administrative action and therefore does not constitute self-help. Before they can hold a third party personally liable, a specific relationship must exist between the taxpayer and the third party. SARS must identify the grounds on which it alleges that the third party acted negligently or fraudulently. If the evidence demonstrates that such grounds exist, a letter is sent to the person, which is subject to internal governance procedures within SARS. If approved, the letter is dispatched to the person whom SARS intends to hold liable and they are given a reasonable period to respond to the letter, explaining why they should not be held personally liable for the tax debt. The response is considered and thereafter a final decision is made by a senior SARS official.
The court held that SARS correctly describes the personal liability process as an exercise of public powers. This is evident by the fact that SARS affords the third party an opportunity to make representations before it can hold the third party personally liable for the tax debts. The audi alteram partem right (i.e., fair hearing) is protected by enabling the third party to present his case through an administrative process. Should the third-party dispute liability, their rights to fair administrative action under section 33 of the Constitution are activated. The Promotion of Administrative Justice Act, 2000 (“PAJA”) then becomes appliable which enables a substantive challenge to SARS decision through a review. In other words, the court of law will be the ultimate arbiter of the fairness of the SARS decision.
SARS further argued that if it required them to first obtain a court judgment to hold a third party like Greyvensteyn personally liable it would have an adverse consequence on the country’s fiscus because it could take years for a matter to be finally determined. The administrative nature of section 180 allows for a speedier and more efficient remedy.
The High Court agreed that SARS actions amount to administrative action, which are reviewable under PAJA. Therefore, SARS actions do not amount to self-help. Furthermore, the review does not merely involve a review of process but also considers substantive reasonableness and errors of law and/or fact. Consequently, the jurisdiction of the court was not ousted by section 180 read with section 184(2) and there was no infringement of Greyvensteyn’s constitutional rights.
Tel: +27 31 570 5496
Email graeme.palmer@gb.co.za